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A Negotiation Perspective on the Fiscal Cliff

December 28, 2012

What does a negotiation perspective tell us about the possibility of a successful outcome to the fiscal cliff? Professor Pri Shah provides some answers.

The American people are getting increasingly frustrated with the posturing and slow pace of progress in Washington on the fiscal cliff. What does a negotiation perspective tell us about the possibility of a successful outcome?

Department of Work and Organizations Associate Professor Pri Shah, who teaches negotiations, provides some answers.

1. Framing the Bargain as "Win-Win" Rather than "Win-Lose" and Focusing on "Interests" Not "Positions"

While it makes for a better story to frame the fiscal cliff negotiation as a two-party battle of wills and focus on the vast differences between them, framing a negotiation as "win-lose" where one side's gains results in a loss to the other, typically result in suboptimal outcomes. When we have both sides laying down hard-line principles, such as Rep Jim Jordan (R-Ohio) drawing a line in the sand on raising taxes, or Rep Joe Crowley (D, N.Y.) articulating a bright-line principle on Social Security, negotiation becomes almost impossible. The problem of negotiating over principles is that it inhibits one's ability to compromise.

In contrast, a "win-win" negotiation focuses away from positions and taps into the interests behind these positions to find mutually acceptable solutions. Reaching a solution requires openness and flexibility. What politicians need to realize is that this is not weakness, as is often portrayed, but instead demonstrates strength. Both sides need to explore a combination of options that tackle their interests rather than focusing on principles. What do the Republicans and Democrats really want for the American people from their talks? Focusing on packages of options is a good way to make progress. While one may be unwilling to concede on a particular issue in isolation, the combination may facilitate necessary concessions (i.e., Republicans may not concede on tax cuts alone, but will likely concede if they get a few high-profile entitlement cuts - perhaps on the Medicare eligibility age or chained CPI).

2. Managing Interests in a Complex Multiparty Negotiation

Making things more difficult is that while President Obama and House Speaker Boehner provide the face of the negotiations, this is far from a two-party conflict. Each side represents numerous groups and will need to convince their constituencies to abide by the concessions agreed upon. This is particularly true for Boehner as he navigates internal GOP divisions. At some point when a deal is reached, he will need to go back to the House and convince his fellow Republicans to vote for it. With both parties losing moderate members in the last election, the coalitions forming on both sides are likely to be more extreme in their views.

While chaos will surely ensue if all stakeholders are brought to the table, there does need to be a sense of participation among all Representatives in the House. There is clearly a danger if a deal is reached and they don't feel that they had input.

Different sub groups in each party hold different interests. Among the Republicans, the interests vary from limiting government size to not raising taxes, simplifying the tax code, and advocating for a strong defense. Among Democrats, interests vary from progressive taxes to protecting the poor and defending entitlements. This can help create a basket of interests, but makes negotiations more difficult. Understanding who actually speaks for each group, what compromises they are willing to live with, and judging if they have the credibility to deliver votes become crucial tasks for the leaders on both sides.

Unfortunately, public rhetoric is amplified in a multiparty context as no one wants to appear weak to his or her constituents.

3. Saving Face while Closing the Deal

When the negotiations come close to agreement each side needs to equip the other with face-saving arguments. Both will need to provide small wins to the other side on issues that are important but perhaps tangential to the deal. For instance, if Democrats compromise on the Medicare eligibility age, they will need to persuade their base that this prevented much worse cuts in other programs. On the Republican side, if they agree to higher taxes on the wealthy, they need to point to cuts in entitlement programs suggest a new direction for spending cuts on sacred Democratic issues.

4. The importance of Bipartisan Friendships

Bipartisan friendships formed outside the political arena build trust and mutual respect, both of which are critical in tough negotiations. Friendships among politicians play an important role in finding creative solutions to solve difficult problems, and make it less likely that one would vilify their negotiation partner.

There was a time in Washington when bipartisan friendships were common (Ted Kennedy & Orrin Hatch; Tip O'Neill used to have a regular after hours whiskey with Richard Nixon). This did not raise suspicions about the integrity or strength of their own convictions or party allegiance. These friendships formed naturally as a result of politicians working and living side by side. This seems to be a thing of the past as fewer elected representatives move their families to D.C. This is unfortunate, as a key element facilitating political progress may be lost forever.

On a positive note, women senators have a bipartisan women's supper group that meets monthly at each other's houses. While they may not agree on issues, they have gotten to know and respect each other, which facilitates their ability to work together on tough issues. Rather than attack each other in public, they simply "resolve conflicts the way friends do" says Sen. Kay Bailey Hutchinson (R-Texas). Sen. Amy Klobuchar may not agree with Sen. Lisa Murkowski (R-Alaska) on everything but says, "when we went on family vacation to Alaska, Lisa had us over to her house."